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HMRC internal manual

MLR1 Penalties Guidance

Penalties guidance: the MLR penalty process: overview: Compliance Penalties Part 1

Compliance penalties

There are effectively 3 parts to this process:

  • calculating the total starting penalty
  • calculating the penalty cap to arrive at a maximum penalty
  • applying the reduction percentage, where appropriate, to this figure to give the final penalty figure.

The total starting penalty is comprised of two parts, the fixed starting penalty and the additional penalty.

The fixed starting penalty applies to MLR compliance breaches, and cases where businesses fail to notify us of any changes to their registration details. This is set at £5000.

The regulations state that any penalty must be ‘effective, proportionate and dissuasive’. By setting a fixed starting penalty, this ensures the penalty is ‘dissuasive’.

The additional penalty only applies to compliance breaches, not registration breaches, and the purpose of it is to make sure the penalty reflects the seriousness of the offence and the amount of money potentially exposed to money laundering. This therefore ensures the penalty is ‘proportionate’.

For information on how we calculate the additional penalty for Money Service Businesses/High Value Dealers see MLR1PP2220 

For information on how we calculate the additional penalty for Accountancy Service Providers/Trust or Company Service Providers/Estate Agency Businesses see MLR1PP2230